Short Sales Rising
By Deborah Ball Kearns, RE/MAX Times Online Associate Editor
The number of Short Sales flooding the U.S. real estate market has drastically increased in the past year – and will continue to rise, according to reports from Equator Financial Solutions and Campbell Communications.
Equator announced on July 15 that 300,000 Short Sales have been initiated on its system since November, according to a DSNews article. The company, which provides an online platform for 7 of the top 10 U.S. banks to manage their REO and Short Sale inventory, reported that it had hit the 200,000 mark for Short Sale initiations in June. In just a month's time, that number has increased by 50 percent.
Short Sales made up 18 percent of buy-side real estate transactions in June, according to an independent survey of more than 2,500 real estate agents across the country.
The survey, conducted by Campbell Communications, found that Short Sales constituted 12.5 percent of property sales in July 2009. That's compared with move-in ready and damaged REOs, which comprised 17.9 and 19.8 percent, respectively, of all closed transactions during the same time frame.That trend has apparently reversed. In June, move-in ready REOs and damaged REOs comprised 15.2 percent and 13 percent, respectively, of closed transactions.
"These numbers are encouraging because it tells us that more people are avoiding foreclosure," says RE/MAX Chairman and Co-Founder Dave Liniger (ABR, CDPE, CRB). "Short Sales are infinitely more complex and time-consuming transactions, so agents need to be educated on how to assist homeowners in this situation. We'll see an even greater influx of Short Sales flood the market as people take advantage of the government's Home Affordable Foreclosure Alternatives program."
The HAFA program, which streamlines the Short Sale process, was created to help both homeowners and banks avoid foreclosure, through the use of Short Sales or a deed-in-lieu of foreclosure when homeowners don’t qualify for or maintain a loan modification. The HAFA program is crucial in streamlining the Short Sale process for homeowners, lenders and real estate agents as an alternative to foreclosure. Here are some of the key program guidelines:
- Lenders must respond to Short Sale requests within 10 business days of receipt of the offer package.
- The seller will be released from all liability for repayment of the primary mortgage debt.
- Subsequently, the seller is entitled to a relocation incentive of $3,000, which will be deducted from the gross sale proceeds at closing.
- The lender will be paid $1,500 to cover administrative and processing costs for a Short Sale or a deed-in-lieu.
The property must be listed with a licensed real estate professional who does regular business in the community where the property is located.
The lender is prohibited from requiring, as a condition of approving the Short Sale, a reduction in the agreed-upon real estate commission.
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